Central Energy Fund board gives a go-ahead for establishment one petroleum company

Energy and mineral resources minister Gwede Mantashe.
Energy and mineral resources minister Gwede Mantashe.
Image: Simphiwe Nkwali © Sunday Times

The board of the Central Energy Fund has given management a go-ahead to start a process to consolidate its three subsidiaries.

The three are PetroSA, Strategic Fuel Fund and Igas, which will all merge to establish the New Petroleum Company of SA.

This merger is a culmination of a policy statement made by mineral resources and energy minister Gwede Mantashe before the portfolio committee on May 7. The policy statement was then endorsed by cabinet on June 10, paving a way for the appointment of a restructuring company to look into the most viable model to establish National Petroleum of South Africa.

Government’s decision in merging the companies is to improve efficiency and minimize duplication that inhibit the firms from being a catalyst in growing the economy.

“This process would also result in enhanced cost reductions, integrated common systems, processes, and improved shared service models to maintain strategic relevance and sustain a competitive edge in a rapidly changing oil and gas industry,” the Central Energy Fund said in a statement.

It added that the establishment of the new firm would help as the new company would leverage on the combined resources and assets of the three entities to achieve a “just and fair” energy transition.

CEO of the Central Energy Fund Ishmael Poolo said this was the right move for the country's energy space.

  “South Africa needs a very strong and agile energy company to be able to compete and advance key components of the National Development Plan aimed at creating a capable state as well as supporting government to address the triple challenge of unemployment, poverty and inequality. Fast-tracking the rationalisation of these three subsidiaries into a National Petroleum Company will position the group to become an integrated and diversified energy company,” Poolo said.

The efficiency of parastatals has been a focal point for economist and also rating agencies. Experts have criticised parastatals for being expensive to run and called for mergers in some while others, they said, should be unbundled.

In one case, government has already began to unbundle Eskom into three entities – power generation, distribution and transmission. The unbundle received a lot of criticism from the trade unions which described the move as part of the privatisation of the power utility.

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